Overview
- The ECB is expected to announce a 25 basis-point increase to the deposit rate at its meeting on Thursday, with the decision and a press conference livestreamed to explain the outlook.
- Higher oil and energy costs linked to the Iran conflict have pushed euro-area headline inflation to about 3.2% in May and core inflation to roughly 2.5%, prompting policymakers to act.
- The bank will publish updated inflation and growth projections with the decision, and those forecasts will be the key factor shaping if this step becomes a multi-step tightening cycle.
- Markets have priced as many as three hikes this year, while many economists surveyed expect fewer additional moves, leaving uncertainty over the eventual pace of tightening.
- A rate rise would help savers by lifting deposit offers but would raise borrowing costs for households, firms and governments, with recent analysis showing EU interest payments near €358 billion last year.